Finance union calls for banking levy to be widened to Revolut and other fintechs

The Financial Services Union (FSU) has called on the Government to extend the lifespan of the banking levy and widen the number of companies captured to include Revolut and other fintechs operating in the Republic.

The levy is currently raising about €87 million a year, down from €150 million annually between 2014 and 2021, before Ulster Bank and KBC Bank Ireland became exempt from the charge after they signalled they were exiting the market.

Minister for Finance Michael McGrath launched a public consultation last month on the future of the levy. It has been extended a number of times since it was introduced in 2014, initially for three years, and is currently due to come end in December 2023.

“To abolish the levy at this moment would send a negative message not just to customers, but to the population at large, for whom the damage wrought by the financial crisis has not been forgotten,” the FSU general secretary John O’Connell said in submission to the department before the consultation period came to a close last Friday.

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The FSU noted that Irish banks continue to be able to minimise their tax bills 15 years after the financial crisis as they hold large levels of deferred tax assets as a result of crisis-era losses

“For many small businesses and individuals struggling with a cost-of-living crisis, removing the bank levy from highly profitable operations would seem insensitive and untimely.”

The FSU noted that Irish banks continue to be able to minimise their tax bills 15 years after the financial crisis as they hold large levels of deferred tax assets as a result of crisis-era losses. The State’s three surviving retail banks, AIB, Bank of Ireland and Permanent TSB, had more than a combined €4 billion of deferred tax assets at the end of last year, according to figures in their respective annual reports.

Mr O’Connell’s submission noted that the three banks “are operating very profitably”. Each has upgraded its medium-term profitability targets in the past six months after moving to carve up most of the loan books of Ulster Bank and KBC Ireland and, more importantly, they benefit from an environment of rising interest rates. The European Central Bank has increased its deposit rate from minus 0.5 per cent to 3.25 per cent since last July.

‘Level playing field’

Twelve other EU countries, from Austria to Sweden, as well as the UK have some form or bank levy, according to the Department of Finance data. Almost all of these brought in levies in the wake of the international financial crisis.

Mr O’Connell said: “The rationale behind introducing the banking levy then, continues to be valid today. The Minister should work with [EU] member state counterparts to ensure a level playing field across the EU with the objective of seeing a banking levy introduced in all EU member states.”

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While the Irish charge is based on deposit interest retention tax (Dirt) paid by the banks, the FSU does not offer a suggested methodology for the collection of a levy in the event it is expanded beyond the three banks.

“Department of Finance is best placed to apply its resources and expertise to ensure the principles of fairness and transparency are central to creating a level playing field for all,” the submission said.

Officials in the Department of Finance had weighed the future of the levy when carrying out a review of Irish retail banking last year, but refrained from offering any recommendation in their final report.

However, early drafts of recommendations being pushed by the review team in the latter stages of the process included one calling for the banking levy, in place since 2014, to be phased out over five years to 2028, documents released to The Irish Times under freedom of information laws show.